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Monday, 26 October 2015 08:23

Stevens guided Founders in sale to Mahou with focus on legacy, synergy, liquidity

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Mike Stevens Mike Stevens

Given tremendous growth in the $19.6 billion craft beer industry, Mike Stevens knew there would be an outpouring of interest from strategic and financial buyers in Founders Brewing Co., the Grand Rapids-based brewery he and Dave Engbers founded in 1997.

Just as importantly: He realized the pool of potential investors that could position Founders for the future and give it the resources it needed to compete globally — on the craft brewery’s terms — was very small and diminishing in number.

“The buying pool that was out there, though small, was very hungry,” Stevens said. “If I didn’t jump through that window now, as short as two years from now, that buyer could have bought and be gone. … Some of those have already bought. Three years from now, they’re not buying.”

Stevens and Founders’ executive team realized they needed to start planning to secure the long-term future of the company’s brand and launched a search for a partner that understood its values and could help the company scale up to reach the global market.

“I knew if we timed it right and played it right, we would be in charge of designing our brand’s future, whereas if we waited and those opportunities were gone, we could have still done a deal, but we wouldn’t have been in charge of designing it,” he said.

Their priorities were:

  • Legacy, or protecting the brand so that Founders could become a multigenerational brewery.
  • Synergy in partnering with someone who could help the company with beer production and international sales and marketing (i.e., distribution).
  • Liquidity for the group of 32 investors, including Stevens and Engbers, who had fueled the company’s growth to that point.

“We were OK with opening it up and speaking to all kinds of potential buyers, from family offices to private equity to investigating ESOPs to strategics … from the largest of breweries all the way down,” Stevens said.

As part of a process that took the better part of a year, Stevens said he quickly eliminated private equity firms from the list of potential investors because they couldn’t address the company’s primary legacy concerns. Likewise, family offices “cared more about legacy, but they didn’t have the synergy,” he said.

According to Stevens, the process of elimination led the company to another realization: “We need to speak to breweries.”

“Whether you like the beer that brewery X makes or not, the bottom line is they wake up every f***ing day and they do what we do,” he said. “They put their boots on and they go and make beer and sell beer. So there was a comfort there for us in speaking to like-minded people.”

After conversations with the likes of global juggernauts Anheuser-Busch InBev and SABMiller similarly failed to address Founders’ legacy concern, the 125-year-old, family-owned Mahou-San Miguel Group of Spain “entered the equation,” Stevens said.

“Their leading questions were more about the longevity and the protection of Founders as a brand than about anything on (the financial or production side),” he said. “We clicked with those guys right away.”

For his leadership in the process in which Founders sold a 30-percent equity stake to Mahou San Miguel, Stevens was recognized as a finalist in the 2015 MiBiz Dealmaker of the Year Award in the executive category.

Importantly for Founders, partnering with the Spanish company allows it to tap into expertise in international beer distribution at a time when global tastes are shifting in favor of American craft styles. Meanwhile, Mahou San Miguel gains access to “an educational funnel about American craft beer,” which the company sees as the next wave to hit the global market and which it had no prior expertise in, Stevens said.

While the current wave of M&A in the craft brewing industry remains mainly focused on filling out the domestic market, Founders’ sale and a small number of other deals — in particular, Petaluma, Calif.-based Lagunitas Brewing Co.’s 50-50 partnership with the Dutch Heineken N.V. — focus on taking craft beer to the global market.

“We’re in the very early days of U.S. brewers moving overseas,” said Bart Watson, chief economist of the Brewers Association, a Boulder, Colo.-based craft brewery trade group. “To get out ahead of that curve is a tremendous opportunity.”

To that end, Stevens said Founders could “some day” look to leverage Mahou San Miguel’s seven global breweries to produce its beer overseas for sale in international markets.

“Our main concern is to make sure you the consumer, no matter where you live in the world, has the freshest of beers that we can make,” he said.

While liquidity was third on the list of priorities, Mahou’s undisclosed investment also allowed Stevens, Engbers and the remaining investors to realize some returns from the business.

“It felt good to know that we crossed over some type of finish line and it was OK to take some money off the table and say thanks to all the investors and especially to our families,” Stevens said. “Quite frankly, it’s a pretty fun phone call when you can call somebody up who’s in retirement age and say, ‘Remember that five grand you gave me? Well, I’m cutting you a check for X.’ And believe me, that X was multiples and multiples times larger.”

Read 2529 times Last modified on Tuesday, 27 October 2015 09:15

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